Yes - marketing salaries are generally an overhead cost. For example, when a developer is benched or is assigned to a non-billable or internal project, their work does not contribute to the company’s profits. However, there are some cases in which a developer's salary can be included in the sum of overheads. To answer this question, we need to consider two cases: a developer actively working on a billable project and a currently benched developer.Īs long as the developer is involved in commercial projects, their salary is not an overhead cost, as it is directly responsible for generating profits for the company - in other words, their work is billable, and the customer pays for it. Is a developer's salary an overhead cost? Therefore, we have prepared a few simple examples illustrating the most popular cases you may encounter in the IT company. Still, putting that theory into practice is a bit more complicated. Generally, if the employee’s work is billable - a customer pays for it - their wage is not an overhead cost. The employee’s position and current situation in the company is what separates salaries from overhead costs. The answer to this question is: it depends on what the business overhead costs cover, and what are they responsible for. To do that, you must allocate overhead costs using the cost allocation formula. In many cases this will be fixed overhead costs.Īs every billable project benefits from company overheads (for example: workshops for your employees to improve their skills), these expenses are always shared proportionally between the project. Importantly, these overheads are not directly linked to any specific project running in your company. It generally includes all the expenses the business has to cover to keep running smoothly, such as the operating costs (i.e., marketing, sales, administration, executive management) and basic bills (i.e., rent for office space, utilities, taxes, office supplies, other office equipment, advertising expenses, but also essential items and devices, such as printers, paper, and new equipment). On the other hand, company or business overhead is a much broader category. Importantly, project overheads only impact the profitability of the project they were generated in - other projects do not need to cover any share of these costs. Naturally, just like in the definition of overheads, that does not include the costs of work. Project overheads are all the additional costs linked directly to your project that you need to cover to complete the project.
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